Congressman DeFAzio Introduces the NO BAILOUTS Act

Discussion in 'Economics' started by poyayan, Sep 30, 2008.

  1. poyayan



    Bringing Accounting, Increased Liquidity, Oversight and Upholding Taxpayer Security

    1) Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.

    This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.

    2) Require the Securities and Exchange Commission to restricting naked short sells permanently

    This bill will require SEC to implement a rule that blocks naked selling, selling a stock short without first borrowing the shares or ensuring the shares can be borrowed. Such practices many times harm the companies represented in the sales and hurt their efforts to raise capital. There is no economic value produced by naked short sales, but significant negative effects.

    3) Require the Securities and Exchange Commission to restore the up-tick rule permanently.

    This bill will require SEC to implement a rule that blocks short sales without an up-tick in the market. On September 19, 2008, the SEC approved a temporary pause of short selling in financial companies “to protect the integrity and quality of the securities market and strengthen investor confidence.” This rule prevents market crashes brought on by irrational short term market behavior.

    4) “Net Worth Certificate Program”

    This bill will require FDIC to implement a net worth certificate program. The FDIC would determine banks with short-term capital needs and the ability to financially recover in the foreseeable future. For those entities that qualify, the FDIC should purchase net worth certificates in these institutions. In exchange, these institutions issue promissory notes to repay the FDIC, counting the amount “borrowed” as capital on their balance sheets. This exchange provides short term capital, with not cash outlay. Interest rates on the certificates and the FDIC notes should be identical so no subsidy is necessary.

    Participating banks must be subject to strict oversight by the FDIC including oversight of top executive compensation and if necessary the removal of poor management. Financial records and business plans should be subject to scrutiny while participating in the program.

    In 1982, Congress approved a program, known as the Net Worth Certificate Program, that allowed banks and thrifts to apply for immediate capital assistance. From 1982 to 1993, banks with total assets of $40 billion participated in the program. The majority of these banks, 75%, required no further assistance beyond the certificate program.

    5) Increase the FDIC Insurance limit from $100,000 to $250,000.

    The bill will require the FDIC raise its limit to provide depositors confidence that their money is safe and help eliminate runs on banks which are destabilizing to the industry.

    ( I guess occasionally, they do work in day off. Or... their staff? )
  2. sho-tim


    Just a bunch of bs that won't do anything about the real problem, which was affirmative action for lending, causing a trillion in lousy loans.

    An attempt to sell the public that the problem was republican deregulation.

    Guess what, the public will probably buy it, if recent polls can be believed.
  3. Actually a pretty decent list.
  4. Christ, if I hear "up tick rule" one more time.... enough already!

  5. Isn't this the same idiot who started all this transaction tax mess? Hmmm I don't see any of that mentioned in his version of the bailout act...

  6. I am with you. Makes me sick to my stomach. Uptick rule and transaction tax, are these people retarded? How much tax are they gonna collect when volume is cut in half? Won't even cover the revenue that is lost in SEC fees, NASD fees etc, from the falling volume.

    There's no short selling, nevermind an uptick rule in the Shanghai market. That didn't stop it from falling 70%.

    There WAS an uptick rule in 2000-2002, that didn't stop the Nasdaq from falling 75%.

    When it comes to being a capitalist. To paraphrase the president. You're with us, or you're against us.

    On a different note. To people who can't pay their mortgages. Tough shit, ain't my problem. Sell the damn house, get what you can, repay your debts and move on. Get your damn hand out of my wallet.
  7. poyayan


    First, do you prefer up-tick rule or banning shorts?

    Second, there is no transaction fee in this bill, right?

    Third, is this bill better than the paulson bill. No one said this is the only bill. This bill is to take Paulson's "gun on the US economy" out. Then people can use time to work out additional plans.
  8. One can circumvent uptick rule by buying and selling short same stock at the same price. Why have this rule then?
  9. poyayan


    Dunno..:) Maybe it is an excuse to get rid of the silly short banning rule?
  10. Red, we cant do that because........

    "But the children will suffer"

    "they didnt know what they were signing and the mortgage brokers took advantage of them"

    "Every American should own a home"

    "The rich get richer and the poor get poorer"

    "speculators caused this mess"

    "Its about being fair"

    Or the zillion other non economic emotional bullshit reasons to not let the free market work freely producing the most for the most.

    We are down about 22% from the all time high last year. What are they going to do if we REALLY go into a bear market and it falls another 30%-50% ???
    #10     Sep 30, 2008